Episode 052 - Five Keys to Building a Resilient Indy Business with Nicholas Erik
November 10, 2020
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Nicholas Erik discusses the FIVE KEYS TO BUILDING A RESILIENT INDY BUSINESS. He talks about how organic newsletter subscribers serve as a valuable representation of the health of your business, how understanding your monthly expenses can actually be a stress-reliever, and how an hour spent with an accountant will pay you back many times over in the course of your author career.
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Nicholas Erik is the author of science fiction and urban fantasy, with over 20 books, including THE FINAL COLONY series and THE REMNANTS trilogy. He also writes comprehensive guides for his fellow indy authors on how to sell more books, build your fanbase, and be more productive. He runs 1-on-1 ads workshops and provides ads management for select clients.
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"If I had two takeaways from this entire interview, it'd be stop spending money on the credit card ... and get a good accountant who you can trust and who can you can hopefully work with for the next 10, 20, 30 years." --Nicholas Erik
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Matty: Hello and welcome to The Indy Author Podcast, today my guest is Nicholas Erik. Hey Nick, how are you doing?
[00:00:06] Nick: I'm doing well, Matty. Thanks for having me on.
[00:00:08] Matty: It is my pleasure. To give our listeners a little bit of background on you ...
[00:00:13] Nicholas Erik is the author of science fiction and urban fantasy, and has written over 20 books, including THE FINAL COLONY series and THE REMNANTS trilogy. He also writes comprehensive guides for his fellow indy authors on how to sell more books, build your fan base, and be more productive. He runs one-on-one ad workshops and provides ad management for select clients.
[00:00:34] And he recently appeared on Mark Dawson's Self-Publishing Show, talking with interviewer James Blatch about Book Ad Tips to Boost Your Author Business. That was very useful and I'm going to include a link to that in the show notes.
[00:00:46] But today, Nick is here to talk about Five Keys to Building a Resilient Indy Business. This is a post I saw on his website, which has lots of great resources, and I just wanted to invite him on the podcast to talk a little bit more about that.
[00:01:00] But before we jump into the five keys, what made you decide to spin up a non-fiction side of your author business?
[00:01:09] Nick: It really started from the beginning, I would say, maybe in 2012, 2013, one of my parents, sent out a Christmas letter as people did around Christmas time. And they mentioned that I had published a book and was working on a novel, and someone reached out and it really just started from there. So I have them to thank for that and getting that started. And then around probably 2015, 2016, I started writing these guides back on KBoards and those ended up being 50,000, 60,000 words, I think, of content over the months and years. And eventually I started putting them on my own site and things grew.
[00:02:08] Matty: At what point did you make the switch from posting those on KBoards to posting them on your own site? ...
[00:00:06] Nick: I'm doing well, Matty. Thanks for having me on.
[00:00:08] Matty: It is my pleasure. To give our listeners a little bit of background on you ...
[00:00:13] Nicholas Erik is the author of science fiction and urban fantasy, and has written over 20 books, including THE FINAL COLONY series and THE REMNANTS trilogy. He also writes comprehensive guides for his fellow indy authors on how to sell more books, build your fan base, and be more productive. He runs one-on-one ad workshops and provides ad management for select clients.
[00:00:34] And he recently appeared on Mark Dawson's Self-Publishing Show, talking with interviewer James Blatch about Book Ad Tips to Boost Your Author Business. That was very useful and I'm going to include a link to that in the show notes.
[00:00:46] But today, Nick is here to talk about Five Keys to Building a Resilient Indy Business. This is a post I saw on his website, which has lots of great resources, and I just wanted to invite him on the podcast to talk a little bit more about that.
[00:01:00] But before we jump into the five keys, what made you decide to spin up a non-fiction side of your author business?
[00:01:09] Nick: It really started from the beginning, I would say, maybe in 2012, 2013, one of my parents, sent out a Christmas letter as people did around Christmas time. And they mentioned that I had published a book and was working on a novel, and someone reached out and it really just started from there. So I have them to thank for that and getting that started. And then around probably 2015, 2016, I started writing these guides back on KBoards and those ended up being 50,000, 60,000 words, I think, of content over the months and years. And eventually I started putting them on my own site and things grew.
[00:02:08] Matty: At what point did you make the switch from posting those on KBoards to posting them on your own site? ...
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[00:02:13] Nick: Maybe around 2018, 2019. I just started building my newsletter for nonfiction. I didn't have a sign up for that. And then started sending out a newsletter at that point, which was still pretty sporadic, maybe every four or five months at most, but just slowly building that since it seemed like people were responding positively to it. And there was a positive reaction to the way I organized and structured the information since everything is out there in the indy community and people are very generous with their time and sharing data, but it's like one piece of information is over here and then another piece of information is over here and slightly contradicts it. So by putting it all together, you could curate it and also find out what works and what didn't and tell people, hopefully, what was the most likely to work for them. So that was the idea behind that.
[00:03:15] Matty: The curation is great. One of the pieces of advice I like to give new indy authors is just pick a couple of trusted resources and just go to them for the information you need, because you could spend, a whole weekend trying to decide if you need an ISBN for your e-book. No, just pick somebody you trust and go to them for that.
[00:03:37] And once you found the person that really clicks with you, it's nice because sometimes one writer has a way of framing things up that makes a little more sense. Two resources can be saying the same information, but one is just clicking with you a little bit more. So your site is definitely one that I could point people to with a good conscience for that kind of information.
[00:03:57] Nick: Awesome. Absolutely. And I agree with that a hundred percent. There are a lot of people who have podcasts, who have courses, various pieces of information out there. And a lot of people are saying similar things. Or they should be saying similar things, at least on a fundamental level, in terms of getting good covers, writing good blurbs, writing good books, et cetera. And a lot of it is what resonates with you and motivates you to keep going since this business is difficult and it is certainly competitive, and there are days where you want to quit and are discouraged. And I think that finding fellow-minded authors who share a similar point of view can be helpful.
[00:04:48] And also never discount someone who maybe your viewpoint isn't exactly aligned with them. I think that those people may be the most valuable at all, because they can challenge your thinking. And if you're on a plateau in your career and stuck or frustrated, they can help you get to the next level because they can help you see around a corner or see something that you never saw yourself.
[00:05:12] Matty: That's a good entree to what we want to talk about today, which is the five keys to building a resilient indy business. And I think this is an example of one of these things that I think I speak for many indy authors when I say that the true business nuts and bolts of running a business is something that is probably not my favorite thing to consider, but the most important thing to consider because all the other things depend on the success of that.
[00:05:37] I liked in the article that you had online, your statement that you're not responsible just for the words as an indy author, you also have all the responsibilities of a publisher, and that is a great point. The other point that I really liked was your comment that the author career is a boom-bust profession. It's not like you can rely on a regular paycheck coming in every month or every week. So some of the things you talked about really speak to how indy authors can deal with that kind of scenario in a businesslike way. And I just wanted to throw these fundamentals out and then ask you to comment on them.
[00:06:15] And the first key, the keys to running a resilient indy business, is know your key performance indicators. Talk a little bit about what key performance indicators are and what the importance of them is to an indy author.
[00:06:28] Nick: So key performance indicators, or KPIs, you'll see them referred to for short, that's just basically a business acronym for the metrics that are most important and that you need to be tracking. There are a lot of things that you can track and many of them have utility, but certainly I've worked with a lot of authors in various capacities and just getting people to track consistently is often a big step in increasing their overall profitability and getting to the next level in their career.
[00:07:09] And what I would start with if you're not tracking anything at all is weekly net profit, monthly net profit. Net profit is just basically the amount of money left over in your pocket after you've paid everybody, your editor, your cover designer, Facebook for the ads, promo sites, all that. And the goal of being in business is to make a profit.
[00:07:38] Now that doesn't necessarily mean that at the point in your career that you're at, it is going to be profitable. Sometimes you have to build up a series. Sometimes you're using a loss-leader strategy where things are going to pay off days or weeks later on down the line. There are a lot of different ways to approach that, but in the end, at some point, the goal is to start making profit. Especially, obviously, if you want to do this for a living, you have to be bringing in a profit because otherwise you can't pay for groceries with Amazon rank or anything like that. So it's really about that at the end of the day.
[00:08:21] And then the second KPI that I like to track weekly and monthly as well is organic newsletter subscribers. And by organic, I mean people who have already read your book and these people come from the front and back matter of your book. And these individuals tend to be much more engaged than people from other sources where you can find newsletter subscribers like newsletter builders or cross promos. And there's nothing necessarily wrong with building your newsletter that way. That is a valid strategy and useful for some authors.
[00:09:02] But the reason I track the organic subscribers specifically is that gives you a good idea of how your books are resonating with readers. It gives you a good catch-all metric that incorporates the marketing, the craft, your overall productivity, because if you're not releasing books, if you're not marketing them, if you're not doing that consistently and building over time, people don't like your books or don't like them enough to subscribe to your newsletter, then there's some sort of constraint in that chain that you have to address.
[00:09:39] And there are so many things that you can try. Again, many of them are useful ,but those two, you start tracking those weekly, it really helps give you a very good snapshot of your business. And net profit, by the way, for anybody not familiar with it, it's just revenue minus expenses. And in this case, our revenue is generally the royalties from Amazon Draft2Digital, Apple Books, Google Books, et cetera. ACX if you have audio books. And then your expenses are anything to do with the production of the books, the advertising of the books, formatting, all that.
[00:10:22] Matty: And for a scenario where someone is on, let's say, KDP for print and e-book, Draft2Digital for e-book, and IngramSpark for print -- I think that's probably a pretty common environment for an indy author to be working in -- where do you go to find the income information for each of those? Because I find that to be tricky. For a while I was trying to do exactly what you're saying and I realized in some cases I was double counting some stuff from some of those sources because I was getting multiple reports and I wasn't entirely clear about what each of the reports was showing and so in some cases I was double counting. Do you have any advice about what the master sources of information should be?
[00:11:07] Nick: What I would say is set a day where you do that. So if you're tracking weekly, I would do Monday to Sunday. That tends to be the business week for most people. And that way you can have that set structure, even if you fall behind and miss a few weeks, you can always catch up and do Monday to Sunday for the past few weeks and fill that in. That helps you not double count information by accident.
[00:11:36] The other thing is you probably want to wait a day or two, depending on what information you're putting into the sheet. What you'll find is certain ad platforms, for example, mainly Amazon ads, can take about a day, two days to really finalize their data, and that can change slightly. And you want to make sure that you're obviously entering the most accurate information possible when you're entering expenses.
[00:12:05] What I do is if I book a promo site or a cover or something that bills my card or my PayPal account immediately, I'm going to log that in my expenses immediately. That way I don't forget about it. It doesn't slip through the cracks, and I have a running tally of what I'm spending and what's going out the door that month. If it's something like Facebook or BookBub who bill you in $500 increments, $900 increments, et cetera, then I typically wait until the end of the month because I can pull that report really easily. I can just go to last month and pop that in. So those are a couple of things that I do with the ad.
[00:12:48] With the publishing platforms themselves, there are a number of ways to get the data. One thing you want to make sure is that you're pulling it from a consistent place. For example, on the KDP dashboard, if you look at the area with the graphs, that data is often different, slightly, on a day-to-day basis than if you look at the sales reporting or the KDP beta dash, and it's not a giant difference, but over time, it's going to make for a few sales here, a few page reads over here, a few free downloads, and it'll slightly throw off your data. Again, it's not going to be a massive difference.
[00:13:34] For tax purposes what I would use is the royalty payments that come into your actual bank account. I would track the revenue and royalties that you're getting before then, because the royalty payments don't hit your bank account for two months after those are available to us and one and a half months after they finalize since the KU payments finalize around the 15th of each month.
[00:14:01] But that is very helpful for getting that final figure and can make a big difference if you are pushing significant volume in other countries, because the exchange rate is only finalized on the day that your royalties are deposited in your actual bank account, and that can make the number fluctuate pretty significantly if you're either doing a lot of revenue or if maybe half of your sales are in the UK, for example, because your bank says the exchange rate and when Amazon deposits that, that's the only point that you know, whether that's coming in at 1.3, 1.2, 1.25. So you want to use that for tax purposes.
[00:14:55] Matty: In terms of the weekly reporting, is the consistency of your source more important than advice about let's use KDP, for example, that you should be using a particular statistic among those available on the KDP dashboard.
[00:15:09] Nick: Yeah. I'd just be consistent. Whatever is most comfortable for you. And if you happen to use a different source for one week, that's okay. I wouldn't worry about it that much. The changes are going to be small.
[00:15:28] Matty: The other question I had for you is how do you distinguish organic newsletter subscribers from, I don't know, inorganic newsletter subscribers, purchased newsletter subscribers, however you want to define the opposite of organic.
[00:15:41] Nick: So organic subscribers come from people who have read the books. So you can only sign up to those lists by entering from a link from your front or back matter. And what you do is you send them to a specific form and that way they're immediately segmented or tagged when they sign up as organic.
[00:16:08] And then for the non-organic subscribers that you're getting from BookFunnel cross promos or other cost promos or giveaways that you're doing, what you want to do is when you import them, make sure you tag or segment them and you can have the source be BookFunnel October 2020. And then also make sure that you have a catch-all tag where it's Giveaways or Cross promos, or you could have just a large tag Inorganic if you wanted to just put all of them together.
[00:16:46] And that way you can specifically see what the open rates are for the various segments, what the click-through rates are. Click-through rate is more important because you're trying to sell books and the only way to get people to buy the book is to get them over to Amazon. So people are opening, but not yet clicking them, that's not the ultimate goal that we have with the list.
[00:17:10] And what you find is that the organic subscribers tend to be more engaged by a significant margin, which makes sense because people who sign up through a giveaway or cross promo have no familiarity with our books. We have to warm them up a bit and introduce our work to them and see if they'll like it.
[00:17:32] And the other reason that you segment them in this fashion is that with the inorganic newsletter subscribers, what you need to do is send them an autoresponder, which is a set of automated emails to get them familiar with your work and maybe deliver a free novella or a free book if you have something like that, or just introduce them to your various series, what you're about, give them an idea of why they might want to stick around and also why they might want to try one of your books because you have to first make them readers. Whereas the organic folks are already readers the instant that they subscribe.
[00:18:18] Matty: I can see another episode coming up at The Indy Author Podcast on effective use of email lists because that's a whole art and science unto itself, I know. But so that we don't spend our entire time on that topic, let's move on to the second key to running a resilient indy business, which is know your monthly burn.
[00:18:38] Nick: Okay. Monthly burn is just the amount of money that you basically need to survive each month. And this encompasses all your mandatory expenses, meaning things you really cannot cut. So I'm not talking about cable or Netflix. It's really things like your mortgage payment or your rent or health insurance. And I have a list on the site, but other things are your car payment, utilities like electricity, water, mandatory business expenses. Sometimes you have something that you cannot cancel. For example, for my courses, I host all the videos via Wistia and I can't cancel that because then all the videos disappear. People have paid for them. So that's a mandatory business expense. Can't be cut.
[00:19:36] And for indy authors, most of us don't have many mandatory business expenses. I would say probably your mailing lists is the only one. Maybe your website. In a real pinch, I guess you could reduce those -- not recommended -- but what that gives you is an idea of how much money you need coming in each month to basically maintain an even balance, so you're not going negative and going underwater.
[00:20:09] And that gives you a very clear mark of what you need to shoot for how much you might need to save each month to smooth out that volatility that we talked about earlier. And also it gives you an opportunity to really take stock of your finances and delineate between what is a mandatory expense and what are nice to haves or want to have, but maybe can be reduced or sacrificed if writing and publishing full-time is more important.
[00:20:39] The other thing is if you have any employees or if you have any children, you want to make sure that things like tuition payments or employee salaries are included in that, because those can be pretty significant expenditures.
[00:20:55] And getting that all on paper, it really reduces your stress because now you have an exact amount that you know is going out the door. Whereas before you may think that you need, let's say, $8,000 a month to survive on, and really you need $12,000 or you need $6,000, and that has been why your business hasn't been able to move forward just because so much money is going to other places. Or you might find that you can go full time or start working on the books more because your monthly burn is lower than you thought.
[00:21:32] Whatever the outcome there is, that information is powerful and allows you to make better and more logical decisions because we know how much money you need to survive each month.
[00:21:48] Matty: I was interested when I read that because obviously groceries and mortgage or rent payment and so on are important things to factor in, but they're also a little bit different than you would factor in in some other kind of business scenario because they're personal expenses. So in other businesses you might have this very distinct differentiation between professional business expenses and personal expenses, but if you're an indy author, it all has to come from the same pot. So how do you ensure that you're factoring in the personal expenses, but keeping them appropriately separate? I'm assuming it's a good idea for any indy author to have a separate bank account or at least a separate checking account for their business expenses versus their personal expenses. Would you agree with that?
[00:22:40] Nick: Yeah, you can keep separate accounts. And if you have an LLC and all that, you can set it up so that everything separate or some sort of corporate structure. Absolutely. This is really just an exercise for you. It's not an official exercise. It's not a tax based or accounting exercise. It's really just to know how much money is going out the door and how much you need to bring in and where you might be able to cut. So it's just purely informational. You can keep everything separate, but by getting everything on that sheet that maybe business and personal-related, you get a really accurate snapshot.
[00:23:17] There's a lot of times those are siloed by themselves and you may know that you need $2,000 to keep your business running, but you're not sure about the personal expenses, or you may know that you have $2,000 going out the door every month and $3,000 personal wise, but you never bridged that gap between them and add them up. And that can be a significant source of stress because your brain is thinking, Okay, I only need $2,000 or I only need $3,000. And then at the end of the month, there's not much left over. You're wondering where it all goes, just because you haven't reconciled those two expenditure areas. So it's just really helpful for doing that.
[00:23:58] And again, that sounds probably pretty obvious to most people, but it's astounding how easy it is for our brain to be like these expenses don't count or these expenses aren't related to the business, therefore they don't exist. Things like that. And just by getting them all on paper, you really see how much you need and what to aim for.
[00:24:23] Matty: Yup. So I'm going to move on to key number three, which is save and invest. You had some interesting information about percentages that you were suggesting people factor in there.
[00:24:36] Nick: Yeah. The percentages are going to vary based on what your goals are, how old you are, your retirement objectives, all that. Also, where do you live in the world if your tax rates are higher. One thing that's really important for anybody who's starting out being an indy author is that you're going to obviously pay taxes on your royalties, but most of the time self-employment taxes are higher than what you would pay as an employed individual. And you want to factor that in. You're responsible for that. No one takes it out of your paycheck. You have to do it yourself. And that can be an adjustment because at the end of the year, you might have made $30,000 or $40,000 in royalties, but if you spent all of it, then you're left with scrambling to make up that tax bill.
[00:25:31] And by putting that money aside as it comes in, that is going to alleviate that stress. I recommend at least 30% set aside for taxes. And that number is taken of net profits -- 30% of net profit. It may be more depending on your tax rate, how much in royalties you're doing, where you live.
[00:25:56] Consult with an accountant. This is one of the things that I really, really strongly recommend. You can call accountants in your area and often get free consultations and see which would be a good fit for you, ask them what would be the best way to approach your finances for your business structure, your business. Oftentimes they can give you advice on whether maybe a certain type of corporation would be better for how much you're making in that specific state.
[00:26:28] That can be one of the most valuable consultations that you have. And it can be free and, an accountant, if you have them on your payroll or however you want to term it, not really your payroll, but you know it only costs $250 or $500 a lot of times for them to do the tax return. And you essentially have that resource year-round. Most accountants offer free consultation for clients where you can call them up or you can email their staff and have them look over what you're doing or ask questions. And that can be incredibly valuable.
[00:27:14] And then the other areas are that you're responsible additionally for your savings and your retirement. you can set up some different retirement vehicles. So if you're in the U S you can look into simple SEP IRAs and the solo 401k, and again, that's something that you can potentially discuss with an accountant, what makes sense for your business structure and what would be appropriate there. And I recommend 10% of profits for savings, 10% for retirement.
[00:27:51] And the same things really provide you a cushion because that volatility is really difficult to avoid for all of us. It's just the case where during a release month, you may sell $10,000 or $15,000 worth of books if your career is selling really well and you have an established reader base, and then a couple months later that might go down to $2,000 or $3,000.
[00:28:18] And even if you're advertising, even if you're doing things to push the book, there are just peaks and valleys that are somewhat inevitable. And you want to make sure that you have enough to cover your monthly burn and that can help you do so in times when maybe the royalties dip a little bit below that.
[00:28:39] The other thing I would recommend doing is, it sounds like this is a lot already, but ... you're responsible for pretty much any emergency that props up. You have to pay for your own health insurance as an indy author, if you're in the United States, and those can be significant expenses. So I would err on the side of saving more. And really with the rest of the money, I would try to, if you are going to incur expenditures, make them investments in your business more often than not -- rather than something that's like a new television.
[00:29:18] All those are fine, but if you can invest more in your business, then you can grow it faster and bring in hopefully more revenue. But you really want to be saving a significant portion of the money because you are responsible for so many areas that, if you're coming from a day job, your employer probably took care of or were part of your benefits package.
[00:29:43] Matty: Yup. I'm going to divert from the five keys for a moment to ask about when an indy author is getting started and they're in month one and they've made $12.35 in royalties and they've spent $50 in Facebook ads or whatever, early in the business, you're going to be outlaying more money than you're going to be earning. So how do you negotiate that period? And do you have any thoughts about, at what point you have to rethink this is never going to be a money-making venture.
[00:30:19] Nick: It's a good question. I would say it depends on whether you really want to be a writer. And what I mean by that is if this is something that you want to do every day, then you want to be refining that process as soon as possible. And the difference between writing professionally and writing as a hobby is really that you have to do a lot of things and probably focus on a lot of refinement there and cut a lot of things expense-wise and time-wise out of your day that you wouldn't have to if you're just doing it as a hobby.
[00:31:08] So hobbies tend to cost you money. And then businesses, hopefully they're making money. That is the goal. And there's absolutely nothing wrong with doing this as a hobby. I think that a lot of people will be a lot more satisfied and a lot happier if they were doing it as a hobby or as a side gig where maybe it makes them a little bit of money, but it's really more about the fans and the interaction and getting readers and putting their books out into the world and the satisfaction of writing.
[00:31:36] When you're writing professionally, you often have to make compromises that you as the author may not like, but you're also the publisher and you may have to do things like get covers to market that you're not personally a fan of, and that don't resonate with you. But bucking those trends and the general desires of the market would not be a good thing from a marketability perspective. You may have to learn how to run ads and pay money for advertising, which, depending on who you are, some people really don't like doing that, and you don't have to pay for advertising necessarily to succeed. I would say that that's much more important now. It's harder to get visibility if you don't, but there are certainly ways to spend a lot less there that successful authors employed to market their books.
[00:32:38] But you really have to think how much you want to do this. And that's I think something that goes undermentioned, because the assumption is that everyone wants the same thing and that's not always the case. And there's nothing wrong with writing a book or two a year, say, and just having this as a side gig.
[00:33:00] There are some authors who are full-time, who write a book or two a year, by the way. But a lot of times you have to write maybe a bit faster than you might want, and that can lead to burnout, can lead to stress, where if you really want to be writing two books a year, but you're not making the money that you need to survive and you increase that to four or six, and now you are, but you're unhappy, then that may not be a good deal. So you really have to calibrate it based on how important writing full-time is to you and how much you enjoy or can tolerate some of the publishing aspects. And I think you really probably need to enjoy some of those as well, because they encompass a lot of your day overall, but just consider what you want.
[00:33:51] And you don't have to do that right from the beginning. I think that's a question that evolves over time as you get a better idea of what highly successful authors are doing day to day to succeed. Because the other thing is with an author, if you write a single book, that's a great accomplishment and everyone should definitely be proud of that and publishing that and putting it out into the world. But that process is something that you repeat every day. You're sitting by yourself in a room, making things up. And if you don't fundamentally enjoy that on some level or gain satisfaction from it, then you probably are better served working at a day job or finding another source of entrepreneurship to sustain you financially, and then doing the writing when inspiration strikes, rather than all day, every day.
[00:34:55] Matty: I really liked the example you mentioned about the book cover design, and sometimes you have to live with something that isn't what your creative preference would be, and that idea that there's the creative hat and then there's the business hat. I just had this experience fairly recently. I was working on a book and I decided I was going to play around with book cover designs. I knew I would go to a professional book cover designer when it was time to actually publish it, but I was just interested in playing around and seeing what I could come up with.
[00:35:25] And I went to the website of a photographer that I really like, and I thought, if this pans out, I could always purchase the rights to use this photograph for the book cover. And I put it together don't know Bookbrush or Canva or one of those things and I showed it to a friend of mine, and she said, That's lovely, but I have no idea what genre that book is based on that cover. And if I go to any online retailer and I looked through the thumbnails of the front covers, I can see what kind of cover I should be having. And it wouldn't be my creative choice, but it's an important business choice. So I like that idea of having to bring two different eyes to your work to make it a viable business as well as a viable creative effort.
[00:36:09] Nick: Yeah, the assumption kind of implicit in every discussion that authors have in groups and on forums or if you buy a book is that everyone wants to be a full-time writer. And my argument actually would be that most people don't want to be a full-time writer. And if you look at things as historically, most full-time authors or authors had some sort of day job or patron or something where that alleviated the stress of bringing in the financial resources necessary to continue, because it's very difficult to make a writing, any artistic endeavor and writing and publishing is no different.
[00:36:53] So don't think that you have to do this and make a certain amount of money. You don't, that's not necessarily the goal and it doesn't make the books that you publish any worse or any different, just because you do this as a hobby, or if it's a side income that you can still write and publish great books, it just depends really on how much you want to get into the business side and how many other things you want to do to really push the books to the level that they need to succeed as you're acting as your own publisher.
[00:37:36] Matty: Yup. I want to move on to key number four, which is diversifying your income streams and there's a great quote that I wanted to share. You're talking about your author ads course, and, one of the quotes was that having that diverse income stream "freed me from the tyranny of must." Can you talk about that a little bit? What you mean by the tyranny of must?
[00:38:00] Nick: So with Amazon and the other resellers, one of the things that makes authorship really, really difficult, beyond the level of competition and all the things that you have to learn to compete in the marketplace, is that they do not pay you for 60 days after the month. I believe Google pays 15 days and a couple might pay 45, but that is a long gap that basically, if you're writing on your own, you have to be able to sustain your finances in the middle and you run into cashflow problems a lot of the time where you may have had a great August but you're not getting paid for that until the end of October. If you spend a lot of money on ads, then you're not seeing that money back until October 28th, 29th, if it was spent on Amazon, so you could have spent money on August 1st, that's almost 90 days. And people overlook how important that is. I certainly did at the beginning. It's incredibly difficult to build your business if you're not factoring that into account. And it really means that a lot of times you can't push as hard with the ads and your expenditures as you might want to.
[00:39:27] What helps is having a different source of income because that can bridge and paper over those gaps in cashflow and alleviate a ton of stress. And with the courses, for example, or the consulting work that I do, I get that money immediately in my account. I don't have to wait for it. I don't do the service now and then get paid two months later, or it can be longer with a book because obviously you have to write the book too. So you might start spending money on the book now with editing and cover design and things like that, and you might not publish it for another four or five months.
[00:40:05] So it just provides immediate cashflow there business-wise that can be used to invest in the books without being concerned about turning the ads off, making a decision whether you want to run the ads or invest that money in the cover this month. It is massively underrated to say, keep your day job or have a source of income that you can rely on to be steady as you're building up the book business.
[00:40:38] And what happens is if you only derive income from the book business, especially in the beginning, when you're trying to find your feet and find the genre that you want to write in and all those things that we hopefully find out over time, you can fall into this comparison game where you're looking at everybody else and you're seeing someone killing it in genre X, and they're writing a book a month, they're doing XYZ with their marketing and you say, I have to do that. That's the way to succeed.
[00:41:20] And you get into this kind of arms race. And you have to match the strategy to your strengths. And what I really found was that if you're constantly worried about that money, you tend to make pretty bad decisions based on emotion rather than logic. And it frees any single book from having to succeed. Because you don't need a launch to go well, you don't need a promo to go well, to basically keep your head above water and pay for your various expenses.
[00:42:04] Once you're in that position, eventually something is going to go wrong. And I manage a lot of ads for various people. I run ads for my own books and promos, and I can't tell you the number of things that go wrong. And eventually you gain the skills to be able to pivot and adapt in real time and salvage things that otherwise would be a mess, but there are always going to be things that you can't anticipate, where there's a glitch on an ad platform, or there's a problem uploading the book or your cover designer doesn't get the book cover back in time and you have to push back the pre-order, or whatever the case may be.
[00:42:49] And if everything you have is riding on that moment and on that launch, it's really, really stressful. And if it has to succeed, then eventually you're going to be in a position where it won't, either because the book doesn't do as well as you anticipated or some sort of outside factor that's outside of your control comes in and just hurts you, but it won't hurt you if you have that outside income. it just becomes another learning experience, a way to build skill. And you can basically build on that rather than having it being this hole that you spend a lot of time digging out of unfortunately.
[00:43:37] Matty: The other aspect of income diversification that I think is proving true for me, but I'd be curious to get your sense of whether this is true for other people or not, is the feeling that it's easier to make money on non-fiction than fiction because it lends itself to more different platforms. So I now have two nonfiction books related to the indy publishing world. I have the podcast which has Patreon and Buy Me a Coffee options for patronage. I can imagine doing courses down the line, and so on. Whereas with my fiction books, it's like you've written the book and then it's out there and you can promote it, but it's one product.
[00:44:19] Do you feel like diversifying into both fiction and nonfiction improves the chance of making a success of a business as an indy author.
[00:44:26] Nick: I would say for most people, that's going to be a distraction. So it gets back to what your strengths are and what you enjoy. The only reason I created the guides were really for my own use and everything evolved from there. I don't think that someone writing a 5,000-word guide or a 10,000-word guide, that would probably be pretty miserable for most people, I would imagine. But for me, it's a way to structure the thoughts. And then when I get feedback on it, you can see where there are gaps in your thinking.
[00:44:57] And also, if you're writing something and basically writing it off the top of your head, you really get a clear understanding of what you know, and what you don't know, and what's actually real and what is BS and you are kind of shoving under the rug. And that's really important. One of the best ways to learn is to just teach others. And that's a big part of why I do it. I'm always learning. And it really illuminates gaps in my own thinking and where I can improve.
[00:45:27] But for the average indy author, it's not something I would recommend just because they're probably not going to enjoy it. If you're an author or if you're a business owner and you're writing a nonfiction book, there are a lot of marketing opportunities with the non-fiction, where you can basically use it as a way to generate interest in your business services.
[00:45:54] And you have to be careful there because a lot of these books tend to devolve into business cards, book as a business card type of ideas. Those really aren't helpful and they're not useful for the reader. I don't think that they're going to be really all that helpful for your business. But if you write a good book, then people will check out potentially what your business has to offer.
[00:46:18] So it can be a useful, more of a marketing tool, I would say, for a business owner or something like that, because the nonfiction book itself, unless you write something like a self-help book, doesn't tend to be a big moneymaker. And obviously self-help is a huge genre with a lot of competition. So it's not like the answer there is just write a self-help book and make millions by any means. That's not the case. But the book itself and non-fiction doesn't tend to be the money generator. You need something behind it.
[00:46:50] What I will say is that the guides have existed for three, four years, and I put them into a book earlier this year, revised them heavily. Put it into book structure. That elevated my non-fiction business to a level that I was really surprised about. And all this content had been free, but just having it out there as a book opened up doors that I was surprised, and it got people reading it who were familiar with my stuff. Maybe they had been reading my newsletter but hadn't read those since they were just online as basically blog posts, which in retrospect is fairly obvious because very few people really want to read a 10,000-word article online. It's not a really great reading experience. You lose your place and then you don't know where exactly to start up again.
[00:47:45] So that was surprising to me and I do this marketing stuff every day. It can be a powerful tool, but I would only recommend it if you have interest in it, because it can take a lot of time and energy away from your fiction endeavors.
[00:48:02] What I would recommend doing is if you're interested in this is test the waters. If you're an indy author, you're probably in various Facebook groups -- start answering people's comments, start answering forum threads if you're on forums, and that's really how that all started. And you'll get a good idea of whether you like teaching, whether you like writing about that pretty fast.
[00:48:28] And I think most people would probably prefer to write another book in their series or come up with new world building ideas and things like that. But if it resonates with you, then it can definitely be a nice way to supplement your income and also grow your own skills. So that's really the primary reason I do it is just, it is so helpful for solidifying your base of knowledge and keeping yourself current in an industry that is constantly changing, that it has immense value, regardless of any financial bonuses that may be on top of that.
[00:49:06] Matty: I want to now move to the fifth key, which is don't run a credit card balance. Do you want to give a few inspirational words behind that?
[00:49:17] Nick: Yeah. You know, all this stuff is based on experience, and what a credit card allows you to do is it allows you to ignore problems with your cash flow because you can charge something and you're thinking, I'm fine. I'll pay this off. But eventually what happens is that you run into a situation where you're not getting your Amazon earnings for another 15 days or 40 days or whatever. And then you also have this massive credit card bill that's accruing interest and compounding negatively, which you don't want.
[00:49:49] So compound interest is very, very important and extremely powerful in your career, both from a personal level and also on a financial level where, if you're making good investment decisions and saving money and having that build over time, what you put in eventually turns into something much, much greater. Same idea applies, however, to negative things like your credit card balance that's compounding at 20% a year. That's a huge interest rate.
[00:50:22] People underestimate how much money that is. If you're investing in the market, the average return -- and I don't know the timeframe for this, but let's say for the past 50 to a hundred years -- is approximately somewhere around like seven, 8% for stocks in the US, and that's not a guarantee that you'll get that since things change, but that is seven to 8% and that's really been the best investment vehicle for the past century or so at least in the United States.
[00:51:00] Credit card APR is 20, 24.99, depending on what your credit score is, who you're getting it from. It's not a good deal at all. And people, I see them paying for stuff and saying, I'm getting these points and I'm getting five X points back. One thing that I do here is I have a credit card with no points. I don't get any percent cash back. I don't get anything. And people may say, Oh, you're leaving 2% on the table. You're not. The credit card companies are very smart. They've run all the numbers. They know that what happens is you incentivize people to spend more and spend more than they would already.
[00:51:41] So 2%, if you spend $10K is $200 and you could easily spend that amount, additionally, in ads because you have this kind of subconscious loop saying, Oh, I basically get this money back because I have this credit card rewards points coming in the future. And it's funny how our brains work, and you have to be aware of those. So I've certainly gone through that thinking. And the reason that I don't have those points is because I can't really stop that from happening. So the only option is to just not play that game. And I would highly recommend just avoiding credit cards in general.
[00:52:31] The other thing that's not on the list, but that was mentioned earlier that is really important is getting an accountant. It's one of the best investments you can make in your career. It's very inexpensive. And it's going to save you a ton of time. So if I had two takeaways from this entire interview, it'd be stop spending money on the credit card. If you have a credit card balance, don't worry. I think probably most people have been there. Just come up with a plan to pay it down. And then the other thing is get a good accountant who you can trust and who can you can hopefully work with for the next 10, 20, 30 years. And those will pay massive dividends. Those can be worth 10,000, 50,000, a hundred thousand dollars over the course of your career very easily.
[00:53:24] Matty: I really liked when I got to the end of the accompanying article on your website, that I'll also provide a link to in the show notes, and I think it would be easy to get to the end of these five keys to building a resilient business and feel totally overwhelmed. But you ended with this action step: set a timer for 25 minutes and make it as far as you can. And focusing in on those couple of key things: logging the net profit and organic subscribers and calculating monthly burn. And I think to those we could add, cut up your credit card and look up an accountant online.
[00:53:59] Nick: Yeah. One thing that should be noted is that these are not things that I did all at once. So any piece of content that I put out or really anyone puts out, presumably, is something that they accumulated over weeks or months or years of work and just like testing things and finding out mostly what doesn't work. Not charging things to credit cards, that is more effective than spending thousands of dollars on it.
[00:54:28] So it can be overwhelming. At least if you're looking at this from square one, or even if you're in the middle of it, but you layer these things on top of each other and you start where you're at. That's so important. A lot of people say, okay. I can't do 10% savings this month, so I'm not going to save anything.
[00:54:51] Get in the habit of doing it, set it up. So you have 1% savings, transfer $1 from your earnings over into a different bank account or into a stock account. And it's not so much that that $1 is going to accrue some massive amount of interest or make you rich. It is the habit that is going to do that because your brain starts to realize that not only does this work, but it becomes part of your approach to the business, and you build the skill of doing it.
[00:55:28] And that's something that I would highly recommend doing. Break it down to a block that you can do at this point. If that's five minutes investing in this and logging your numbers, great. If that's saving $5, great. You don't have to compare it to anyone else. You can grow over time. And once you start developing a skill and developing that habit, it's much easier to grow it than if you sit and wait and say, I'm only going to do this once I have X amount of money, or once I have a four hour block to do this.
[00:56:07] The other thing is that a lot of this stuff is boring. Even if you like money, a lot of this stuff is not exciting because all of the rewards are in the future. And it's very hard to get excited about $50,000 that's going to appear potentially 20 years from now. That's such an abstract concept that it doesn't feel real at all. And it's not really motivating. Break it down into whatever chunks that you need and meet yourself where you are in your career. And you can see those skills build over time. It's really more about the skills and habits than it is about the particular percentages or the length of time that you do it. Just build on that consistently and grow it.
[00:56:59] Matty: I love that message. And, I love the resources that you're offering here. You also have a bunch of other resources online and in other places, so, Nick, please let everybody know where they can go to find out more about you and your work and information online.
[00:57:14] Nick: You can find me online at nicholaserik.com. And there are guides on my website and various resources. And if you want to check out the book I've written, you can check out THE ULTIMATE GUIDE TO BOOK MARKETING. That's a comprehensive resource that's available on Amazon and some other retailers ... currently, but you never know, maybe it will be exclusive at some point. We're always making decisions on exclusivity and whether or not to publish at a certain retailer or not. And that's part of the beauty of being an indy author. You have to adapt, but if you're agile and flexible, what you're doing today isn't necessarily what you're going to be doing tomorrow.
[00:58:10] So if you're not as successful as you'd like to be at this point or hope to be, then tomorrow's always a new day and you can always build on what you're doing and make something happen.
[00:58:26] Matty: Great. Thank you so much. This has been so helpful.
[00:58:29] Nick: Well, thanks for having me.
[00:03:15] Matty: The curation is great. One of the pieces of advice I like to give new indy authors is just pick a couple of trusted resources and just go to them for the information you need, because you could spend, a whole weekend trying to decide if you need an ISBN for your e-book. No, just pick somebody you trust and go to them for that.
[00:03:37] And once you found the person that really clicks with you, it's nice because sometimes one writer has a way of framing things up that makes a little more sense. Two resources can be saying the same information, but one is just clicking with you a little bit more. So your site is definitely one that I could point people to with a good conscience for that kind of information.
[00:03:57] Nick: Awesome. Absolutely. And I agree with that a hundred percent. There are a lot of people who have podcasts, who have courses, various pieces of information out there. And a lot of people are saying similar things. Or they should be saying similar things, at least on a fundamental level, in terms of getting good covers, writing good blurbs, writing good books, et cetera. And a lot of it is what resonates with you and motivates you to keep going since this business is difficult and it is certainly competitive, and there are days where you want to quit and are discouraged. And I think that finding fellow-minded authors who share a similar point of view can be helpful.
[00:04:48] And also never discount someone who maybe your viewpoint isn't exactly aligned with them. I think that those people may be the most valuable at all, because they can challenge your thinking. And if you're on a plateau in your career and stuck or frustrated, they can help you get to the next level because they can help you see around a corner or see something that you never saw yourself.
[00:05:12] Matty: That's a good entree to what we want to talk about today, which is the five keys to building a resilient indy business. And I think this is an example of one of these things that I think I speak for many indy authors when I say that the true business nuts and bolts of running a business is something that is probably not my favorite thing to consider, but the most important thing to consider because all the other things depend on the success of that.
[00:05:37] I liked in the article that you had online, your statement that you're not responsible just for the words as an indy author, you also have all the responsibilities of a publisher, and that is a great point. The other point that I really liked was your comment that the author career is a boom-bust profession. It's not like you can rely on a regular paycheck coming in every month or every week. So some of the things you talked about really speak to how indy authors can deal with that kind of scenario in a businesslike way. And I just wanted to throw these fundamentals out and then ask you to comment on them.
[00:06:15] And the first key, the keys to running a resilient indy business, is know your key performance indicators. Talk a little bit about what key performance indicators are and what the importance of them is to an indy author.
[00:06:28] Nick: So key performance indicators, or KPIs, you'll see them referred to for short, that's just basically a business acronym for the metrics that are most important and that you need to be tracking. There are a lot of things that you can track and many of them have utility, but certainly I've worked with a lot of authors in various capacities and just getting people to track consistently is often a big step in increasing their overall profitability and getting to the next level in their career.
[00:07:09] And what I would start with if you're not tracking anything at all is weekly net profit, monthly net profit. Net profit is just basically the amount of money left over in your pocket after you've paid everybody, your editor, your cover designer, Facebook for the ads, promo sites, all that. And the goal of being in business is to make a profit.
[00:07:38] Now that doesn't necessarily mean that at the point in your career that you're at, it is going to be profitable. Sometimes you have to build up a series. Sometimes you're using a loss-leader strategy where things are going to pay off days or weeks later on down the line. There are a lot of different ways to approach that, but in the end, at some point, the goal is to start making profit. Especially, obviously, if you want to do this for a living, you have to be bringing in a profit because otherwise you can't pay for groceries with Amazon rank or anything like that. So it's really about that at the end of the day.
[00:08:21] And then the second KPI that I like to track weekly and monthly as well is organic newsletter subscribers. And by organic, I mean people who have already read your book and these people come from the front and back matter of your book. And these individuals tend to be much more engaged than people from other sources where you can find newsletter subscribers like newsletter builders or cross promos. And there's nothing necessarily wrong with building your newsletter that way. That is a valid strategy and useful for some authors.
[00:09:02] But the reason I track the organic subscribers specifically is that gives you a good idea of how your books are resonating with readers. It gives you a good catch-all metric that incorporates the marketing, the craft, your overall productivity, because if you're not releasing books, if you're not marketing them, if you're not doing that consistently and building over time, people don't like your books or don't like them enough to subscribe to your newsletter, then there's some sort of constraint in that chain that you have to address.
[00:09:39] And there are so many things that you can try. Again, many of them are useful ,but those two, you start tracking those weekly, it really helps give you a very good snapshot of your business. And net profit, by the way, for anybody not familiar with it, it's just revenue minus expenses. And in this case, our revenue is generally the royalties from Amazon Draft2Digital, Apple Books, Google Books, et cetera. ACX if you have audio books. And then your expenses are anything to do with the production of the books, the advertising of the books, formatting, all that.
[00:10:22] Matty: And for a scenario where someone is on, let's say, KDP for print and e-book, Draft2Digital for e-book, and IngramSpark for print -- I think that's probably a pretty common environment for an indy author to be working in -- where do you go to find the income information for each of those? Because I find that to be tricky. For a while I was trying to do exactly what you're saying and I realized in some cases I was double counting some stuff from some of those sources because I was getting multiple reports and I wasn't entirely clear about what each of the reports was showing and so in some cases I was double counting. Do you have any advice about what the master sources of information should be?
[00:11:07] Nick: What I would say is set a day where you do that. So if you're tracking weekly, I would do Monday to Sunday. That tends to be the business week for most people. And that way you can have that set structure, even if you fall behind and miss a few weeks, you can always catch up and do Monday to Sunday for the past few weeks and fill that in. That helps you not double count information by accident.
[00:11:36] The other thing is you probably want to wait a day or two, depending on what information you're putting into the sheet. What you'll find is certain ad platforms, for example, mainly Amazon ads, can take about a day, two days to really finalize their data, and that can change slightly. And you want to make sure that you're obviously entering the most accurate information possible when you're entering expenses.
[00:12:05] What I do is if I book a promo site or a cover or something that bills my card or my PayPal account immediately, I'm going to log that in my expenses immediately. That way I don't forget about it. It doesn't slip through the cracks, and I have a running tally of what I'm spending and what's going out the door that month. If it's something like Facebook or BookBub who bill you in $500 increments, $900 increments, et cetera, then I typically wait until the end of the month because I can pull that report really easily. I can just go to last month and pop that in. So those are a couple of things that I do with the ad.
[00:12:48] With the publishing platforms themselves, there are a number of ways to get the data. One thing you want to make sure is that you're pulling it from a consistent place. For example, on the KDP dashboard, if you look at the area with the graphs, that data is often different, slightly, on a day-to-day basis than if you look at the sales reporting or the KDP beta dash, and it's not a giant difference, but over time, it's going to make for a few sales here, a few page reads over here, a few free downloads, and it'll slightly throw off your data. Again, it's not going to be a massive difference.
[00:13:34] For tax purposes what I would use is the royalty payments that come into your actual bank account. I would track the revenue and royalties that you're getting before then, because the royalty payments don't hit your bank account for two months after those are available to us and one and a half months after they finalize since the KU payments finalize around the 15th of each month.
[00:14:01] But that is very helpful for getting that final figure and can make a big difference if you are pushing significant volume in other countries, because the exchange rate is only finalized on the day that your royalties are deposited in your actual bank account, and that can make the number fluctuate pretty significantly if you're either doing a lot of revenue or if maybe half of your sales are in the UK, for example, because your bank says the exchange rate and when Amazon deposits that, that's the only point that you know, whether that's coming in at 1.3, 1.2, 1.25. So you want to use that for tax purposes.
[00:14:55] Matty: In terms of the weekly reporting, is the consistency of your source more important than advice about let's use KDP, for example, that you should be using a particular statistic among those available on the KDP dashboard.
[00:15:09] Nick: Yeah. I'd just be consistent. Whatever is most comfortable for you. And if you happen to use a different source for one week, that's okay. I wouldn't worry about it that much. The changes are going to be small.
[00:15:28] Matty: The other question I had for you is how do you distinguish organic newsletter subscribers from, I don't know, inorganic newsletter subscribers, purchased newsletter subscribers, however you want to define the opposite of organic.
[00:15:41] Nick: So organic subscribers come from people who have read the books. So you can only sign up to those lists by entering from a link from your front or back matter. And what you do is you send them to a specific form and that way they're immediately segmented or tagged when they sign up as organic.
[00:16:08] And then for the non-organic subscribers that you're getting from BookFunnel cross promos or other cost promos or giveaways that you're doing, what you want to do is when you import them, make sure you tag or segment them and you can have the source be BookFunnel October 2020. And then also make sure that you have a catch-all tag where it's Giveaways or Cross promos, or you could have just a large tag Inorganic if you wanted to just put all of them together.
[00:16:46] And that way you can specifically see what the open rates are for the various segments, what the click-through rates are. Click-through rate is more important because you're trying to sell books and the only way to get people to buy the book is to get them over to Amazon. So people are opening, but not yet clicking them, that's not the ultimate goal that we have with the list.
[00:17:10] And what you find is that the organic subscribers tend to be more engaged by a significant margin, which makes sense because people who sign up through a giveaway or cross promo have no familiarity with our books. We have to warm them up a bit and introduce our work to them and see if they'll like it.
[00:17:32] And the other reason that you segment them in this fashion is that with the inorganic newsletter subscribers, what you need to do is send them an autoresponder, which is a set of automated emails to get them familiar with your work and maybe deliver a free novella or a free book if you have something like that, or just introduce them to your various series, what you're about, give them an idea of why they might want to stick around and also why they might want to try one of your books because you have to first make them readers. Whereas the organic folks are already readers the instant that they subscribe.
[00:18:18] Matty: I can see another episode coming up at The Indy Author Podcast on effective use of email lists because that's a whole art and science unto itself, I know. But so that we don't spend our entire time on that topic, let's move on to the second key to running a resilient indy business, which is know your monthly burn.
[00:18:38] Nick: Okay. Monthly burn is just the amount of money that you basically need to survive each month. And this encompasses all your mandatory expenses, meaning things you really cannot cut. So I'm not talking about cable or Netflix. It's really things like your mortgage payment or your rent or health insurance. And I have a list on the site, but other things are your car payment, utilities like electricity, water, mandatory business expenses. Sometimes you have something that you cannot cancel. For example, for my courses, I host all the videos via Wistia and I can't cancel that because then all the videos disappear. People have paid for them. So that's a mandatory business expense. Can't be cut.
[00:19:36] And for indy authors, most of us don't have many mandatory business expenses. I would say probably your mailing lists is the only one. Maybe your website. In a real pinch, I guess you could reduce those -- not recommended -- but what that gives you is an idea of how much money you need coming in each month to basically maintain an even balance, so you're not going negative and going underwater.
[00:20:09] And that gives you a very clear mark of what you need to shoot for how much you might need to save each month to smooth out that volatility that we talked about earlier. And also it gives you an opportunity to really take stock of your finances and delineate between what is a mandatory expense and what are nice to haves or want to have, but maybe can be reduced or sacrificed if writing and publishing full-time is more important.
[00:20:39] The other thing is if you have any employees or if you have any children, you want to make sure that things like tuition payments or employee salaries are included in that, because those can be pretty significant expenditures.
[00:20:55] And getting that all on paper, it really reduces your stress because now you have an exact amount that you know is going out the door. Whereas before you may think that you need, let's say, $8,000 a month to survive on, and really you need $12,000 or you need $6,000, and that has been why your business hasn't been able to move forward just because so much money is going to other places. Or you might find that you can go full time or start working on the books more because your monthly burn is lower than you thought.
[00:21:32] Whatever the outcome there is, that information is powerful and allows you to make better and more logical decisions because we know how much money you need to survive each month.
[00:21:48] Matty: I was interested when I read that because obviously groceries and mortgage or rent payment and so on are important things to factor in, but they're also a little bit different than you would factor in in some other kind of business scenario because they're personal expenses. So in other businesses you might have this very distinct differentiation between professional business expenses and personal expenses, but if you're an indy author, it all has to come from the same pot. So how do you ensure that you're factoring in the personal expenses, but keeping them appropriately separate? I'm assuming it's a good idea for any indy author to have a separate bank account or at least a separate checking account for their business expenses versus their personal expenses. Would you agree with that?
[00:22:40] Nick: Yeah, you can keep separate accounts. And if you have an LLC and all that, you can set it up so that everything separate or some sort of corporate structure. Absolutely. This is really just an exercise for you. It's not an official exercise. It's not a tax based or accounting exercise. It's really just to know how much money is going out the door and how much you need to bring in and where you might be able to cut. So it's just purely informational. You can keep everything separate, but by getting everything on that sheet that maybe business and personal-related, you get a really accurate snapshot.
[00:23:17] There's a lot of times those are siloed by themselves and you may know that you need $2,000 to keep your business running, but you're not sure about the personal expenses, or you may know that you have $2,000 going out the door every month and $3,000 personal wise, but you never bridged that gap between them and add them up. And that can be a significant source of stress because your brain is thinking, Okay, I only need $2,000 or I only need $3,000. And then at the end of the month, there's not much left over. You're wondering where it all goes, just because you haven't reconciled those two expenditure areas. So it's just really helpful for doing that.
[00:23:58] And again, that sounds probably pretty obvious to most people, but it's astounding how easy it is for our brain to be like these expenses don't count or these expenses aren't related to the business, therefore they don't exist. Things like that. And just by getting them all on paper, you really see how much you need and what to aim for.
[00:24:23] Matty: Yup. So I'm going to move on to key number three, which is save and invest. You had some interesting information about percentages that you were suggesting people factor in there.
[00:24:36] Nick: Yeah. The percentages are going to vary based on what your goals are, how old you are, your retirement objectives, all that. Also, where do you live in the world if your tax rates are higher. One thing that's really important for anybody who's starting out being an indy author is that you're going to obviously pay taxes on your royalties, but most of the time self-employment taxes are higher than what you would pay as an employed individual. And you want to factor that in. You're responsible for that. No one takes it out of your paycheck. You have to do it yourself. And that can be an adjustment because at the end of the year, you might have made $30,000 or $40,000 in royalties, but if you spent all of it, then you're left with scrambling to make up that tax bill.
[00:25:31] And by putting that money aside as it comes in, that is going to alleviate that stress. I recommend at least 30% set aside for taxes. And that number is taken of net profits -- 30% of net profit. It may be more depending on your tax rate, how much in royalties you're doing, where you live.
[00:25:56] Consult with an accountant. This is one of the things that I really, really strongly recommend. You can call accountants in your area and often get free consultations and see which would be a good fit for you, ask them what would be the best way to approach your finances for your business structure, your business. Oftentimes they can give you advice on whether maybe a certain type of corporation would be better for how much you're making in that specific state.
[00:26:28] That can be one of the most valuable consultations that you have. And it can be free and, an accountant, if you have them on your payroll or however you want to term it, not really your payroll, but you know it only costs $250 or $500 a lot of times for them to do the tax return. And you essentially have that resource year-round. Most accountants offer free consultation for clients where you can call them up or you can email their staff and have them look over what you're doing or ask questions. And that can be incredibly valuable.
[00:27:14] And then the other areas are that you're responsible additionally for your savings and your retirement. you can set up some different retirement vehicles. So if you're in the U S you can look into simple SEP IRAs and the solo 401k, and again, that's something that you can potentially discuss with an accountant, what makes sense for your business structure and what would be appropriate there. And I recommend 10% of profits for savings, 10% for retirement.
[00:27:51] And the same things really provide you a cushion because that volatility is really difficult to avoid for all of us. It's just the case where during a release month, you may sell $10,000 or $15,000 worth of books if your career is selling really well and you have an established reader base, and then a couple months later that might go down to $2,000 or $3,000.
[00:28:18] And even if you're advertising, even if you're doing things to push the book, there are just peaks and valleys that are somewhat inevitable. And you want to make sure that you have enough to cover your monthly burn and that can help you do so in times when maybe the royalties dip a little bit below that.
[00:28:39] The other thing I would recommend doing is, it sounds like this is a lot already, but ... you're responsible for pretty much any emergency that props up. You have to pay for your own health insurance as an indy author, if you're in the United States, and those can be significant expenses. So I would err on the side of saving more. And really with the rest of the money, I would try to, if you are going to incur expenditures, make them investments in your business more often than not -- rather than something that's like a new television.
[00:29:18] All those are fine, but if you can invest more in your business, then you can grow it faster and bring in hopefully more revenue. But you really want to be saving a significant portion of the money because you are responsible for so many areas that, if you're coming from a day job, your employer probably took care of or were part of your benefits package.
[00:29:43] Matty: Yup. I'm going to divert from the five keys for a moment to ask about when an indy author is getting started and they're in month one and they've made $12.35 in royalties and they've spent $50 in Facebook ads or whatever, early in the business, you're going to be outlaying more money than you're going to be earning. So how do you negotiate that period? And do you have any thoughts about, at what point you have to rethink this is never going to be a money-making venture.
[00:30:19] Nick: It's a good question. I would say it depends on whether you really want to be a writer. And what I mean by that is if this is something that you want to do every day, then you want to be refining that process as soon as possible. And the difference between writing professionally and writing as a hobby is really that you have to do a lot of things and probably focus on a lot of refinement there and cut a lot of things expense-wise and time-wise out of your day that you wouldn't have to if you're just doing it as a hobby.
[00:31:08] So hobbies tend to cost you money. And then businesses, hopefully they're making money. That is the goal. And there's absolutely nothing wrong with doing this as a hobby. I think that a lot of people will be a lot more satisfied and a lot happier if they were doing it as a hobby or as a side gig where maybe it makes them a little bit of money, but it's really more about the fans and the interaction and getting readers and putting their books out into the world and the satisfaction of writing.
[00:31:36] When you're writing professionally, you often have to make compromises that you as the author may not like, but you're also the publisher and you may have to do things like get covers to market that you're not personally a fan of, and that don't resonate with you. But bucking those trends and the general desires of the market would not be a good thing from a marketability perspective. You may have to learn how to run ads and pay money for advertising, which, depending on who you are, some people really don't like doing that, and you don't have to pay for advertising necessarily to succeed. I would say that that's much more important now. It's harder to get visibility if you don't, but there are certainly ways to spend a lot less there that successful authors employed to market their books.
[00:32:38] But you really have to think how much you want to do this. And that's I think something that goes undermentioned, because the assumption is that everyone wants the same thing and that's not always the case. And there's nothing wrong with writing a book or two a year, say, and just having this as a side gig.
[00:33:00] There are some authors who are full-time, who write a book or two a year, by the way. But a lot of times you have to write maybe a bit faster than you might want, and that can lead to burnout, can lead to stress, where if you really want to be writing two books a year, but you're not making the money that you need to survive and you increase that to four or six, and now you are, but you're unhappy, then that may not be a good deal. So you really have to calibrate it based on how important writing full-time is to you and how much you enjoy or can tolerate some of the publishing aspects. And I think you really probably need to enjoy some of those as well, because they encompass a lot of your day overall, but just consider what you want.
[00:33:51] And you don't have to do that right from the beginning. I think that's a question that evolves over time as you get a better idea of what highly successful authors are doing day to day to succeed. Because the other thing is with an author, if you write a single book, that's a great accomplishment and everyone should definitely be proud of that and publishing that and putting it out into the world. But that process is something that you repeat every day. You're sitting by yourself in a room, making things up. And if you don't fundamentally enjoy that on some level or gain satisfaction from it, then you probably are better served working at a day job or finding another source of entrepreneurship to sustain you financially, and then doing the writing when inspiration strikes, rather than all day, every day.
[00:34:55] Matty: I really liked the example you mentioned about the book cover design, and sometimes you have to live with something that isn't what your creative preference would be, and that idea that there's the creative hat and then there's the business hat. I just had this experience fairly recently. I was working on a book and I decided I was going to play around with book cover designs. I knew I would go to a professional book cover designer when it was time to actually publish it, but I was just interested in playing around and seeing what I could come up with.
[00:35:25] And I went to the website of a photographer that I really like, and I thought, if this pans out, I could always purchase the rights to use this photograph for the book cover. And I put it together don't know Bookbrush or Canva or one of those things and I showed it to a friend of mine, and she said, That's lovely, but I have no idea what genre that book is based on that cover. And if I go to any online retailer and I looked through the thumbnails of the front covers, I can see what kind of cover I should be having. And it wouldn't be my creative choice, but it's an important business choice. So I like that idea of having to bring two different eyes to your work to make it a viable business as well as a viable creative effort.
[00:36:09] Nick: Yeah, the assumption kind of implicit in every discussion that authors have in groups and on forums or if you buy a book is that everyone wants to be a full-time writer. And my argument actually would be that most people don't want to be a full-time writer. And if you look at things as historically, most full-time authors or authors had some sort of day job or patron or something where that alleviated the stress of bringing in the financial resources necessary to continue, because it's very difficult to make a writing, any artistic endeavor and writing and publishing is no different.
[00:36:53] So don't think that you have to do this and make a certain amount of money. You don't, that's not necessarily the goal and it doesn't make the books that you publish any worse or any different, just because you do this as a hobby, or if it's a side income that you can still write and publish great books, it just depends really on how much you want to get into the business side and how many other things you want to do to really push the books to the level that they need to succeed as you're acting as your own publisher.
[00:37:36] Matty: Yup. I want to move on to key number four, which is diversifying your income streams and there's a great quote that I wanted to share. You're talking about your author ads course, and, one of the quotes was that having that diverse income stream "freed me from the tyranny of must." Can you talk about that a little bit? What you mean by the tyranny of must?
[00:38:00] Nick: So with Amazon and the other resellers, one of the things that makes authorship really, really difficult, beyond the level of competition and all the things that you have to learn to compete in the marketplace, is that they do not pay you for 60 days after the month. I believe Google pays 15 days and a couple might pay 45, but that is a long gap that basically, if you're writing on your own, you have to be able to sustain your finances in the middle and you run into cashflow problems a lot of the time where you may have had a great August but you're not getting paid for that until the end of October. If you spend a lot of money on ads, then you're not seeing that money back until October 28th, 29th, if it was spent on Amazon, so you could have spent money on August 1st, that's almost 90 days. And people overlook how important that is. I certainly did at the beginning. It's incredibly difficult to build your business if you're not factoring that into account. And it really means that a lot of times you can't push as hard with the ads and your expenditures as you might want to.
[00:39:27] What helps is having a different source of income because that can bridge and paper over those gaps in cashflow and alleviate a ton of stress. And with the courses, for example, or the consulting work that I do, I get that money immediately in my account. I don't have to wait for it. I don't do the service now and then get paid two months later, or it can be longer with a book because obviously you have to write the book too. So you might start spending money on the book now with editing and cover design and things like that, and you might not publish it for another four or five months.
[00:40:05] So it just provides immediate cashflow there business-wise that can be used to invest in the books without being concerned about turning the ads off, making a decision whether you want to run the ads or invest that money in the cover this month. It is massively underrated to say, keep your day job or have a source of income that you can rely on to be steady as you're building up the book business.
[00:40:38] And what happens is if you only derive income from the book business, especially in the beginning, when you're trying to find your feet and find the genre that you want to write in and all those things that we hopefully find out over time, you can fall into this comparison game where you're looking at everybody else and you're seeing someone killing it in genre X, and they're writing a book a month, they're doing XYZ with their marketing and you say, I have to do that. That's the way to succeed.
[00:41:20] And you get into this kind of arms race. And you have to match the strategy to your strengths. And what I really found was that if you're constantly worried about that money, you tend to make pretty bad decisions based on emotion rather than logic. And it frees any single book from having to succeed. Because you don't need a launch to go well, you don't need a promo to go well, to basically keep your head above water and pay for your various expenses.
[00:42:04] Once you're in that position, eventually something is going to go wrong. And I manage a lot of ads for various people. I run ads for my own books and promos, and I can't tell you the number of things that go wrong. And eventually you gain the skills to be able to pivot and adapt in real time and salvage things that otherwise would be a mess, but there are always going to be things that you can't anticipate, where there's a glitch on an ad platform, or there's a problem uploading the book or your cover designer doesn't get the book cover back in time and you have to push back the pre-order, or whatever the case may be.
[00:42:49] And if everything you have is riding on that moment and on that launch, it's really, really stressful. And if it has to succeed, then eventually you're going to be in a position where it won't, either because the book doesn't do as well as you anticipated or some sort of outside factor that's outside of your control comes in and just hurts you, but it won't hurt you if you have that outside income. it just becomes another learning experience, a way to build skill. And you can basically build on that rather than having it being this hole that you spend a lot of time digging out of unfortunately.
[00:43:37] Matty: The other aspect of income diversification that I think is proving true for me, but I'd be curious to get your sense of whether this is true for other people or not, is the feeling that it's easier to make money on non-fiction than fiction because it lends itself to more different platforms. So I now have two nonfiction books related to the indy publishing world. I have the podcast which has Patreon and Buy Me a Coffee options for patronage. I can imagine doing courses down the line, and so on. Whereas with my fiction books, it's like you've written the book and then it's out there and you can promote it, but it's one product.
[00:44:19] Do you feel like diversifying into both fiction and nonfiction improves the chance of making a success of a business as an indy author.
[00:44:26] Nick: I would say for most people, that's going to be a distraction. So it gets back to what your strengths are and what you enjoy. The only reason I created the guides were really for my own use and everything evolved from there. I don't think that someone writing a 5,000-word guide or a 10,000-word guide, that would probably be pretty miserable for most people, I would imagine. But for me, it's a way to structure the thoughts. And then when I get feedback on it, you can see where there are gaps in your thinking.
[00:44:57] And also, if you're writing something and basically writing it off the top of your head, you really get a clear understanding of what you know, and what you don't know, and what's actually real and what is BS and you are kind of shoving under the rug. And that's really important. One of the best ways to learn is to just teach others. And that's a big part of why I do it. I'm always learning. And it really illuminates gaps in my own thinking and where I can improve.
[00:45:27] But for the average indy author, it's not something I would recommend just because they're probably not going to enjoy it. If you're an author or if you're a business owner and you're writing a nonfiction book, there are a lot of marketing opportunities with the non-fiction, where you can basically use it as a way to generate interest in your business services.
[00:45:54] And you have to be careful there because a lot of these books tend to devolve into business cards, book as a business card type of ideas. Those really aren't helpful and they're not useful for the reader. I don't think that they're going to be really all that helpful for your business. But if you write a good book, then people will check out potentially what your business has to offer.
[00:46:18] So it can be a useful, more of a marketing tool, I would say, for a business owner or something like that, because the nonfiction book itself, unless you write something like a self-help book, doesn't tend to be a big moneymaker. And obviously self-help is a huge genre with a lot of competition. So it's not like the answer there is just write a self-help book and make millions by any means. That's not the case. But the book itself and non-fiction doesn't tend to be the money generator. You need something behind it.
[00:46:50] What I will say is that the guides have existed for three, four years, and I put them into a book earlier this year, revised them heavily. Put it into book structure. That elevated my non-fiction business to a level that I was really surprised about. And all this content had been free, but just having it out there as a book opened up doors that I was surprised, and it got people reading it who were familiar with my stuff. Maybe they had been reading my newsletter but hadn't read those since they were just online as basically blog posts, which in retrospect is fairly obvious because very few people really want to read a 10,000-word article online. It's not a really great reading experience. You lose your place and then you don't know where exactly to start up again.
[00:47:45] So that was surprising to me and I do this marketing stuff every day. It can be a powerful tool, but I would only recommend it if you have interest in it, because it can take a lot of time and energy away from your fiction endeavors.
[00:48:02] What I would recommend doing is if you're interested in this is test the waters. If you're an indy author, you're probably in various Facebook groups -- start answering people's comments, start answering forum threads if you're on forums, and that's really how that all started. And you'll get a good idea of whether you like teaching, whether you like writing about that pretty fast.
[00:48:28] And I think most people would probably prefer to write another book in their series or come up with new world building ideas and things like that. But if it resonates with you, then it can definitely be a nice way to supplement your income and also grow your own skills. So that's really the primary reason I do it is just, it is so helpful for solidifying your base of knowledge and keeping yourself current in an industry that is constantly changing, that it has immense value, regardless of any financial bonuses that may be on top of that.
[00:49:06] Matty: I want to now move to the fifth key, which is don't run a credit card balance. Do you want to give a few inspirational words behind that?
[00:49:17] Nick: Yeah. You know, all this stuff is based on experience, and what a credit card allows you to do is it allows you to ignore problems with your cash flow because you can charge something and you're thinking, I'm fine. I'll pay this off. But eventually what happens is that you run into a situation where you're not getting your Amazon earnings for another 15 days or 40 days or whatever. And then you also have this massive credit card bill that's accruing interest and compounding negatively, which you don't want.
[00:49:49] So compound interest is very, very important and extremely powerful in your career, both from a personal level and also on a financial level where, if you're making good investment decisions and saving money and having that build over time, what you put in eventually turns into something much, much greater. Same idea applies, however, to negative things like your credit card balance that's compounding at 20% a year. That's a huge interest rate.
[00:50:22] People underestimate how much money that is. If you're investing in the market, the average return -- and I don't know the timeframe for this, but let's say for the past 50 to a hundred years -- is approximately somewhere around like seven, 8% for stocks in the US, and that's not a guarantee that you'll get that since things change, but that is seven to 8% and that's really been the best investment vehicle for the past century or so at least in the United States.
[00:51:00] Credit card APR is 20, 24.99, depending on what your credit score is, who you're getting it from. It's not a good deal at all. And people, I see them paying for stuff and saying, I'm getting these points and I'm getting five X points back. One thing that I do here is I have a credit card with no points. I don't get any percent cash back. I don't get anything. And people may say, Oh, you're leaving 2% on the table. You're not. The credit card companies are very smart. They've run all the numbers. They know that what happens is you incentivize people to spend more and spend more than they would already.
[00:51:41] So 2%, if you spend $10K is $200 and you could easily spend that amount, additionally, in ads because you have this kind of subconscious loop saying, Oh, I basically get this money back because I have this credit card rewards points coming in the future. And it's funny how our brains work, and you have to be aware of those. So I've certainly gone through that thinking. And the reason that I don't have those points is because I can't really stop that from happening. So the only option is to just not play that game. And I would highly recommend just avoiding credit cards in general.
[00:52:31] The other thing that's not on the list, but that was mentioned earlier that is really important is getting an accountant. It's one of the best investments you can make in your career. It's very inexpensive. And it's going to save you a ton of time. So if I had two takeaways from this entire interview, it'd be stop spending money on the credit card. If you have a credit card balance, don't worry. I think probably most people have been there. Just come up with a plan to pay it down. And then the other thing is get a good accountant who you can trust and who can you can hopefully work with for the next 10, 20, 30 years. And those will pay massive dividends. Those can be worth 10,000, 50,000, a hundred thousand dollars over the course of your career very easily.
[00:53:24] Matty: I really liked when I got to the end of the accompanying article on your website, that I'll also provide a link to in the show notes, and I think it would be easy to get to the end of these five keys to building a resilient business and feel totally overwhelmed. But you ended with this action step: set a timer for 25 minutes and make it as far as you can. And focusing in on those couple of key things: logging the net profit and organic subscribers and calculating monthly burn. And I think to those we could add, cut up your credit card and look up an accountant online.
[00:53:59] Nick: Yeah. One thing that should be noted is that these are not things that I did all at once. So any piece of content that I put out or really anyone puts out, presumably, is something that they accumulated over weeks or months or years of work and just like testing things and finding out mostly what doesn't work. Not charging things to credit cards, that is more effective than spending thousands of dollars on it.
[00:54:28] So it can be overwhelming. At least if you're looking at this from square one, or even if you're in the middle of it, but you layer these things on top of each other and you start where you're at. That's so important. A lot of people say, okay. I can't do 10% savings this month, so I'm not going to save anything.
[00:54:51] Get in the habit of doing it, set it up. So you have 1% savings, transfer $1 from your earnings over into a different bank account or into a stock account. And it's not so much that that $1 is going to accrue some massive amount of interest or make you rich. It is the habit that is going to do that because your brain starts to realize that not only does this work, but it becomes part of your approach to the business, and you build the skill of doing it.
[00:55:28] And that's something that I would highly recommend doing. Break it down to a block that you can do at this point. If that's five minutes investing in this and logging your numbers, great. If that's saving $5, great. You don't have to compare it to anyone else. You can grow over time. And once you start developing a skill and developing that habit, it's much easier to grow it than if you sit and wait and say, I'm only going to do this once I have X amount of money, or once I have a four hour block to do this.
[00:56:07] The other thing is that a lot of this stuff is boring. Even if you like money, a lot of this stuff is not exciting because all of the rewards are in the future. And it's very hard to get excited about $50,000 that's going to appear potentially 20 years from now. That's such an abstract concept that it doesn't feel real at all. And it's not really motivating. Break it down into whatever chunks that you need and meet yourself where you are in your career. And you can see those skills build over time. It's really more about the skills and habits than it is about the particular percentages or the length of time that you do it. Just build on that consistently and grow it.
[00:56:59] Matty: I love that message. And, I love the resources that you're offering here. You also have a bunch of other resources online and in other places, so, Nick, please let everybody know where they can go to find out more about you and your work and information online.
[00:57:14] Nick: You can find me online at nicholaserik.com. And there are guides on my website and various resources. And if you want to check out the book I've written, you can check out THE ULTIMATE GUIDE TO BOOK MARKETING. That's a comprehensive resource that's available on Amazon and some other retailers ... currently, but you never know, maybe it will be exclusive at some point. We're always making decisions on exclusivity and whether or not to publish at a certain retailer or not. And that's part of the beauty of being an indy author. You have to adapt, but if you're agile and flexible, what you're doing today isn't necessarily what you're going to be doing tomorrow.
[00:58:10] So if you're not as successful as you'd like to be at this point or hope to be, then tomorrow's always a new day and you can always build on what you're doing and make something happen.
[00:58:26] Matty: Great. Thank you so much. This has been so helpful.
[00:58:29] Nick: Well, thanks for having me.
Links
Nick on Mark Dawson's Self-Publishing Show Book Ad Tips to Boost Your Author Business
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